Practice Open Banking vocabulary: PSD2, Third Party Provider (TPP), API consent flow, payment initiation service, account information service, and OAuth in open banking.
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What is PSD2 in the context of Open Banking?
PSD2 (Revised Payment Services Directive) is the EU regulation that mandated banks to provide standardized API access to their customers' account data and payment functionality for licensed Third Party Providers, enabling open banking.
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What is a 'Third Party Provider (TPP)' in open banking?
A TPP is a regulated company authorized to use open banking APIs to either access account information or initiate payments on behalf of customers. Examples include personal finance apps and payment gateways.
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What is a 'payment initiation service' in open banking?
A Payment Initiation Service Provider (PISP) can trigger payments directly from a customer's bank account via open banking APIs — bypassing card networks. This enables faster, lower-cost account-to-account payments.
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How is OAuth used in the open banking consent flow?
In open banking, OAuth (typically OAuth 2.0 with OpenID Connect) enables the consent flow: the customer authenticates with their bank, explicitly grants the TPP defined permissions (e.g., read account balance), and the bank issues a scoped access token.
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What is an 'account information service' in open banking?
An Account Information Service Provider (AISP) can access and aggregate a customer's account data across one or more banks via open banking APIs. Personal finance management apps are a common AISP use case.